Yahoo Finance Northwest Natural Holding's (NYSE:NWN) Dividend Will Be $0.4875
Northwest Natural Holding Company (NYSE:NWN) has announced that it will pay a dividend of $0.4875 per share on the 15th of May. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.
View our latest analysis for Northwest Natural Holding
Northwest Natural Holding's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Northwest Natural Holding was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.
The next year is set to see EPS grow by 13.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which is in the range that makes us comfortable with the sustainability of the dividend.
Northwest Natural Holding Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $1.82, compared to the most recent full-year payment of $1.95. Its dividends have grown at less than 1% per annum over this time frame. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Northwest Natural Holding May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Northwest Natural Holding's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Northwest Natural Holding's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Northwest Natural Holding is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Northwest Natural Holding has 3 warning signs (and 1 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
